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One of the toughest challenges that you will face in your home building journey is proper builder comparison.
As discussed in various blogs, comparing builders is near impossible however you can get pretty close.
But before I share with you the 3 Golden rules to comparing builders, here is a general process that people go through when trying to compare builders:
- visit as many builders websites, displays, etc…
- select a design that you like from each builder
- obtain a quote from the builders you like
- start comparing…
- site costs vs. site costs
- promotion vs. promotion
- authority costs vs. authority costs
- and so on…
Now this is all well and good, however the fundamental assumption to this process is flawed.
Let me explain…
You are assuming that every builder defines site costs in exactly the same way and includes exactly the same items. AND you assume that this applies across all other elements of your home build. This is simply not true.
One builder might include Drop Edge Beam as part of their Site Costs (for example) and another builder accounts for Drop Edge Beam in a separate section of their tender. This applies across the board.
Builder 1 may have $20,000 in site costs and Bhttps://learnproperty.com.au/2018/12/11/authority-or-statutory-costs-what-are-they/uilder 2 may have $30,000 in site costs. Does this mean that Builder 2 is more expensive than Builder 1?
The answer is: it does NOT mean anything.
Essentially, comparing the individual items or tender sections (from different builders) does NOT work.
Additionally, it would work well to understand that you are not going to be paying the builder just for the items that you compare. You are not just going to pay the builder for site costs or BASIX or etc… You will be paying the builder the FINAL price.
Think of it as buying a car. Assume you are buying a Toyota Camry 2019 model:
- Dealer 1: they sell the car with alloy wheels (worth $2,000), leather seating (worth $3,000) and sunroof (worth $5,000).
- Dealer 2: they sell the car with alloy wheels (worth $2,500), leather seating (worth $3,500) and sunroof (worth $4,000), GPS (worth $2,000).
Using the common methodology that people generally use to compare; which dealer is cheaper? Which car is cheaper? I mean if Dealer 1 has cheaper wheels then he must be cheaper right? I hope this provides some context when it comes to comparing items in isolation – you tend to miss the bigger picture.
Unfortunately this Isolated Comparison methodology exercise is the most common way that people use to compare builders. AND this is exactly how most people get themselves into trouble.
So if this method does not work then how can you compare builders?
3 Golden Rules
Golden Rule #1: Compare Overall Price
When you are building your family or investment home, you are going to pay the final overall price in your tender. You are not going to be pay the base price only nor site nor authority costs.
You will pay the total of everything in your tender. So it does not make any sense that you compare site costs between different builders to decide if one builder is giving you better value vs. the next.
Here are my recommendations:
- get everything in writing
- add up everything
- this total is the money you will pay for your selected design and inclusions
Golden Rule #2: Compare Apple-to-Apple
The key to comparing is to keep variables to a minimum. For example: if you are comparing two different car brands, it can be difficult to get a proper idea of value specially if the design and features are all different.
This applies to home building as well. If you are comparing different home designs or different home inclusions, then how can you conduct an apple-to-apple comparison?
You simply cannot try and compare different designs, different pricing, different tenders and different inclusions with 100% accuracy.
There are just too many variables to consider so you have to work out a way to compare them on an equal plane. Here is a quick tool to help you compare the inclusions list you are getting from different builders.
You may need to develop a system to compare the other variables as well, or eliminate them altogether if you can.
Golden Rule #3: Compare Tenders NOT Quotes
A lot of people obtain quotes or estimates from different builders and then pick the cheapest quote thinking that they have hit the jackpot. Only to realise that they have made a HUGE mistake once they sign on the dotted line and they start getting hit with all this extra charges.
It’s imperative to understand the difference between a Quote and a Fixed Price Tender. A Quote a guesstimate of your new home build costs. This is NOT a fixed price, it’s simply an educated guess at best.
A Fixed Price Tender is a tender with a calculated price that does not change. It takes into account all of your site, authority and any other costs to build your home. Essentially, you do not pay anymore money unless YOU, the client, make changes to your site, design or inclusions.
It’s very important that you understand how the building process works. Your building journey is a learning journey – the more informed and educated you are, the better decision you will make.
However as you learn and educate yourself; please remember that the builder is still the professional and selecting the right builder for your learning and home building journey is the most critical (if not the only) key!
There is a lot of honest builders that provide great value for money and will always do the right thing by their clients. You will just have to find them.
Hopefully this blog gives you some further guidance to help you filter some of the builders who can turn your dream into a nightmare!